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dividend capture and covered call writing

Combining Dividend Capture with Covered Call Writing: Pros and Cons

Why not use covered call writing with only dividend-bearing stocks to generate three income streams; option premium, share appreciation to the (out-of-the-money) call  strike plus the dividend itself? This article will explore the pros and cons of this approach to covered call writing.   Strategy theory We screen for stocks that have ex-dividend  dates  (also […]

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Ask Alan

Ask Alan 147 – “Why is the Ellman Calculator Showing Negative Returns?”

Alan answers a question posed by Duminda, who asks: I am trying to understand why I am getting a negative ROO on a trade I made with the ETF BOTZ. First, I bought 100 shares for $27.13 and sold the February $27.00 in-the-money strike for $0.75. The option expired worthless and I then sold the […]

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selling cash-secured puts

The Mysteries of a Put Sale

On 8/19/2017, Ron sent me an email detailing a cash-secured put trade he initiated in a virtual account. I saved the email to use in an article because I felt it would be instructive on several fronts.   Ron’s trade with Abiomed, Inc. (NASDAQ: ABMD)   8/10/2017: Sell August 17 $155.00 put (sale price not […]

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Technical Analysis Impacting Stock Eligibility for Option-Selling

Fundamental analysis, technical analysis and common sense principles comprise the 3-pronged approach used in the BCI methodology for screening for option-selling candidates. Technical analysis is the factor that changes most frequently and is the main reason a stock will get “bumped” from our Premium Stock Reports. In our 11/10/2017 Premium Stock Report, MKS Instruments (NASDAQ: […]

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covered call writing exit strategies

Rolling Out-And-Up: Explaining the “Bought-Up” Value of our Stocks

One of our covered call writing exit strategies is rolling out-and-up. This involves buying back (buy-to-close) the current in-the-money option and selling the later-date higher strike price. For example, we may buy back the October $50.00 call option and then sell the November $55.00 call option. We would consider such action if the expiring strike […]

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covered call writing strike price selection

In-The-Money Call Strikes: Intrinsic Value Protects Time Value

Strike price selection is one of the 3 required skills for covered call writing and put-selling. When we sell in-the-money call options we are protecting our positions to the downside while still generating the time value initial profits we have established in our strategy goals. In return, we are relinquishing any opportunity to generate additional […]

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covered strangle strategy

The Covered Strangle: Selling Both Call and Put Options while Owning the Underlying Stock

Why not sell both covered calls and cash-secured puts on the same stock? I’ve been asked this question numerous times. There is actually a strategy that incorporates both BCI go-to strategies into one overall game plan. It is known as the covered strangle.   Components of the covered strangle Buy stock Sell call option Sell […]

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Ask Alan

Ask Alan #146 – “The Cost of Rolling Out and UP”

Alan answers a question posed by Carl, who asks: I am concerned about the cost to roll options when a stock price increases and I want to keep the stock. When I buy back an in-the-money option and roll out-and-up and then the price of the stock goes down, I am actually losing money in […]

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What Criteria Should We Use to Close our Covered Call Positions Early?

When we sell out-of-the-money call options, we are initiating bullish covered call writing positions. Our goals are to generate option premium as well as share appreciation from current market value up to the call strike price. When share value moves well above the strike, leaving that strike deep in-the-money, there is no opportunity to generate […]

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caslculating covered call writing returns

Should We Close Our Deep-In-The-Money Strike or Allow Assignment?

When our covered call positions end up moving deep in-the-money, we are faced with the decision to close as our maximum profit has been realized or take no action and allow assignment. In October 2017, Andrew shared with me a trade he successfully executed and was faced with such a dilemma.   Andrew’s trade with […]

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